Trend and Index following funds bid up beans, corn, and wheat prices throughout the week with both wheat and corn reaching their best levels since last summer. Beans finished the week 33 cents higher, corn gained 9 cents while wheat finished the week up 19 cents. Beans opened the week higher rallying off of weather concerns of too much rain for both Northern Argentina and Northern Brazil. While concerns of too much rain gave thoughts of harvest delays in some key Brazilian soybean growing areas, data released at the end of the week from the U.S. Grain Council may have countervailed the weather worry. The IMEA estimated the Mato Grosso soybean harvest at 45.7% vs. 25% last year. This means that by the end of the weekend, Mato Grosso farmers will have harvested a record 15 million metric tons of soybeans. Yields remain very good and some are now estimating that by the final count, that Mato Grosso, Brazil’s largest soybean growing region could gather a record 31 million metric tons. While the supply side continues to impress, it has been demand that keeps driving beans higher in the near term. The USDA announced the sale of 140,000 metric tons of U.S. soybeans sold to an unknown destination. Unknown again is spelled C-H-I-N-A. The sale is the 2nd in as many days. The sale highlights that Brazilian fob soybean offers are now above the U.S. Gulf into May, and that some residual demand could be pushed back to the U.S. Chinese January trade data reflected a better than expected turn in world demand with exports up a stout 7.9%, a significant improvement on December’s data. China imported 7.66 MMTs of soybeans, up 35% from the prior year and the best since 2010. China soybean trade data argues that China could take 87-88 MMTs of soybeans in the 16/17 crop year, just above USDA’s forecast of 86 MMTs.

Wheat’s surge higher comes on ideas of drier than normal conditions in the western winter wheat belt states. Remember that wheat seedings this year are at a 109 year low.Any fear of lower crop sizes and production due to lack of snow, rain, or any kind of moisture has managed money covering short positions. As of the last week of January, managed money was short over 90K contracts in Chicago wheat. Should weather issues which in this case dryness persist into March; the sizable managed short in the market will begin to cover aggressively to a more neutral position. This has the potential to drive futures prices higher amid a weather premium rally over a lack of moisture in the winter wheat belt.Corn meanwhile has simply followed beans to the upside. It should be noted that funds flipped their positions from net short to net long as the buying trend by fund managers in the grains has included corn as well. While export sales this week were just short of a million metric tons on the week, the WASDE report on Thursday revealed no major surprises for the grain market in general. The nine cent rally in corn this week felt like 30 cents to some with new crop December futures nearing the 4.00 level. It will be interesting to see if producers start selling at or near 4.00 on new crop corn futures, considering that ending stocks are still ample at 2.3 billion bushels. For futures prices to continue their drive higher weather worries need to continue as bullish news needs to be fed to the growing long position in the market.

Technical’s read like this for this week. For March soybeans support is down at 10.36 and with a close under 10.12 is next. Resistance is up at 10.73 and then 10.87. For March corn support comes in first at 3.67 and then 3.58. Resistance comes in at 3.80 and then 3.84. For March wheat support comes in at 4.29 and then 4.08 Resistance is up at 4.60 and then 4.71.

For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

About the author

Sean Lusk is a registered commodity broker and Director of the Commercial Hedging Division of Walsh Trading in Chicago. Sean began in the business as a runner on the trading floor during summer breaks from college in 1993. Upon his graduation from Southern Illinois University at Carbondale in 1996, Sean began his career on the trading floor of the Chicago Mercantile Exchange (CME). Overseeing billions of dollars of transactions working as a clerk in the Eurodollar pit, Sean took the next step and became a floor broker and member of the CME in 2003. He handled customer orders for banks and investment houses from all over the world from inside the Libor pit at the CME.

Now, at Walsh Trading, Sean utilizes his experience in the marketplace and his professional client service skills to aid and assist customers in their trading endeavors.

He writes daily and weekly commentaries focusing on both the Precious Metals and Agricultural Markets along with related market activity.

Sean has been quoted in various media outlets discussing futures markets.

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